Court overturns EPA's cross-state pollution rule

Updated 12:44 am, Wednesday, August 22, 2012

A federal appeals court on Tuesday overturned an Obama administration rule that requires aging power plants in Texas and other states to sharply reduce emissions that contribute to unhealthy air in neighboring states.

In a 2-1 decision, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the Environmental Protection Agency overstepped its authority with the new regulation, which was one of the hallmarks of the federal government's recent efforts to improve air quality. The decision, however, keeps in effect an earlier version of the rule that is weaker, but still requires cuts in air pollution that crosses state borders.

Led by Texas, 14 states and several power companies challenged the legality of the Cross-State Air Pollution Rule, which imposes caps on nitrogen oxide and sulfur dioxide from coal-fired power plants in eastern states. Texas, for one, feared that some utilities would shutter plants to comply with the rule, threatening the state's ability to keep the lights on.

"EPA overlords suffer another defeat to Texas," Texas Attorney General Greg Abbott wrote on Twitter after the ruling. "The power to regulate is the power to destroy."

The EPA has said the rule is necessary to reduce lung-damaging pollution that causes thousands of premature deaths and respiratory illnesses each year around the power plants and in downwind states.

"This is clearly a big blow for breathers in downwind states," said Frank O'Donnell, who heads the advocacy group Clean Air Watch. "The good neighbor rule is a critical component in the EPA's strategy to ensure healthful air quality."

'Fundamental flaws'

The EPA issued the regulation last year in response to the federal appeals court, which told the agency to fix the "fundamental flaws" of an earlier version by the Bush administration.

On Tuesday, the court ordered the EPA to enforce the 2005 regulation, known as the Clear Air Interstate Rule, until the agency develops a valid replacement.

Analysts, however, said that by the time the EPA finalizes a new rule, which would not come sooner than mid-2014, it may not matter because of other regulations coming into effect. Power producers already face new limits on emissions of mercury and other toxic pollutants that will leave few reductions for a revised interstate rule, said Kevin Book, an analyst with ClearView Energy Partners.

The firm still expects power companies by 2016 to retire up to 40 gigawatts of coal-fired generating capacity, or 13 percent of the nation's electricity from coal last year.

Luminant, the largest power provider in Texas, had said the rule would force it to idle units at one of its coal-fired plants and three nearby mines. With the ruling, the company said Tuesday it will spend about $300 million this year on environmental compliance at its power plants.

Trip Doggett, chief executive of the Electric Reliability Council of Texas, which operates the state's grid, expressed relief after the decision, saying the rule "had potentially far-reaching reliability impacts for a grid in which electric use is growing far more rapidly than new generation resources are being built to serve that need."

Federal deadline cited

The rule was to create a 27-state trading program to reduce lung-damaging emissions of smog and soot. To comply with the regulation, power companies would purchase credits or install smokestack scrubbers and other new pollution controls.

Some operators of coal-fired power plants had said the rule would be manageable. Princeton, N.J.-based NRG Energy, the second-largest power generator in Texas, had said it would comply by increasing the efficiency of its scrubbers and using more low-sulfur coal.

The court, however, said federal regulators had overstepped with the rules by requiring Texas and other states to reduce emissions by more than their contributions to the pollution problems of downwind neighbors.

The EPA also did not give states enough time to develop their own plans for reducing emissions before implementing its own, a violation of the Clean Air Act. The law gives the states the primary responsibility for determining how to meet federal standards.